Buying house in Delhi to get more expensive as government hikes transfer duty by 1%

Acquiring property in Delhi may become more expensive as the government implemented a 1 percent increase in transfer duty effective from July 10, 2023. This increase is applied to the purchase of properties valued above Rs 25 lakh. The hike was approved in principle in May 2022 but the official notification by the Delhi government was issued on July 10, 2023. 

The official notification mentioned, “…increase of transfer duty on transfer of immovable properties by the Municipal Corporation of Delhi from 2 percent to 3 percent in case of female (including third gender) and from 3 percent to 4 percent in case of male and other (i.e., any other entity) with effect from the date of publication of this notification,” reads the official notification. 

What is the change in transfer duty?

The transfer duty, a component of stamp duty and registration fees, for property purchases now increases from 2 per cent to 3 per cent for women and the third gender persons and from 3 per cent to 4 per cent for men and other entities. 

The Municipal Corporation of Delhi (MCD), which proposed the increase, expects this move to enhance its revenue collection. However, it has sparked concern among prospective property buyers and real estate firms who argue that it adds to the significant transaction costs and imposes additional tax burdens on the people planning to buy a new property in Delhi.

What will be the impact?

Notably, the Rs 3-7 crore property segment is expected to experience the most significant impact due to the high volume of transactions in this range, according to real estate sector experts. On the other hand, some experts argue that the real estate market might gradually adapt to this change due to the strong demand in recent years. Further, despite the slight increase in charges for properties exceeding Rs 25 lakh, the overall influence on the real estate market is predicted to be minimal.

The hike in transfer duty on immovable properties aims to alleviate the financial crisis faced by the MCD and to bring about policy uniformity. The revised rates could potentially generate additional annual revenue of Rs 1,000 crore. However, potential homebuyers are urged to account for this additional cost when considering purchasing property in Delhi, as the financial implications of this policy change are yet to be fully realised.